They say that necessity is the mother of all invention. They also say that if you can't beat them….join them. While the former statement definitely describes Monitise PLC, (OTCPK: $MONIF), I would hazard a very educated guess that it is the latter of these statements that has encouraged companies such as $APPL, $IBM and $VISA to invest heavily in the Mobile Payments industry. Also, by 2017, one-quarter of online retail purchases will happen on mobile devices, double the number from 2012, according to emarketer.com. They also state that by 2017, m-commerce will account for $113.5 billion in total U.S. retail sales - up 172% from $41.6 billion in 2013. Mobile Payments have been around in one form or another for the last decade or so. Previously, mobile devices required SMS or WAP to utilize the function of processing payments to a bank or business. Now with the advent of NFC as well as handsets that support full HTML, quick and easy transactions are available between your phone or credit card and a reader. The interesting announcements of the past few days have moved mobile payments from the back burner to the forefront of every investors mind. First, IBM and Monitise announced an extension of a current collaboration to continue sharing workers and technology. Second, Apple announced a deal where NXP would provide chips for their I-phone, (not sure if it is for the Iphone6 or not), to enable NFC. Was this just an inevitable reaction to Visa's partnership with Samsung to offer NFC technology in their Galaxy phones? The question now is, are we at the point Visa was at in the 60's? That is, is the entire payments industry about to go through a massive change? In my opinion, yes. So, what is the best way to invest in this industry? No doubt the large companies that are becoming involved are very sound investments, but only a small percentage of their bottom line is directly affected by the mobile payments industry. The easiest way to play this industry is Monitise PLC. (OTCPK: $MONIF). Monitise has been gathering assets to increase its footprint in the mobile payments arena. The picture below shows that portfolio.

Along with the strategic partnership they announced with $IBM, $MONIF has changed from an upfront fee system to a subscription system. It is my belief that this change with not only allow for a larger user base but will help to stabilize revenue going forward. A quick check of the latest conference call will show that they are forecasting 200 million users by 2018. This is, while a very lofty goal, achievable with the current projected growth rate of 500k new users a month. In addition, $MONIF has a medium-term outlook for revenue growth of at least 25% in 2015, and still expects to turn a profit in 2016. This will allow the company to have a steady, predictable revenue stream as well as fund stock buybacks, (to increase shareholder value), or institute a dividend in the future. According to the company, revenue is expected to rise from around £100m, ($166 million dollars) this year to £500m, ($829.6 million dollars) in 2018, as user growth continues, and the firm is targeting an EBITDA margin of 'at least 30%' by 2018. Are there any potholes? Well, the most obvious risk is that the CEO of Monitise, (Alastair Lukies), is just flat out wrong. This could all just be a fad. Also, according to the Macroaxis Z score of 85.8 they have a high probability of going bankrupt in the next 2 years. According to Macroaxis, "this is much higher than that of the sector, and significantly higher than that of Z score industry, the Z score for all stocks is over 1000% lower than the firm." Ok, so why bother buying this company now? Why not just wait until closer to 2016 when they become profitable? Here are my three reasons below:

Monitise is a possible takeover target. One look at the major shareholders of this company lets you know that Visa and Visa Europe hold a combined 11.5% stake in the company. IBM now has 20% of Monitise employees working at their company in the MobileFirst division. Why put all the effort in yourself when you can write a check?

What I am calling educated speculation. We know full well that the markets build certain events and expectations into stock price long before they actually happen. Take one look at the 3D printing market for an explanation. Currently the stock has already had a 13-14% increase due to the announcement of the IBM deal. With the Apple announcement and other NFC advancements…who knows.

Possibility of moving exchanges. There is a possibility that the stock could be listed on the full FTSE market by the end of 2014. This will attract more buyers, especially institutional. The company is also working an angle to get listed on the Nasdaq.

Disclosure: The author is long MONIF. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.Additional disclosure: This article discusses a stock which has a price below $1 US and as such is very speculative. Investors should only allocate 1% of their entire portfolio to a position in this stock. Themes: long-ideas